Yahoo Finance What is gazundering and how can sellers protect themselves from it?
In a buyers’ market, reducing an already-agreed offer is becoming increasingly common. We asked the experts for their tips to help sellers reduce this happening.
What is gazundering?
Gazundering is when a buyer verbally agrees a price but later withdraws their offer, replacing it with a lower one. It is perfectly legal; sometimes a reason is given, such as unexpected work, but often not. In the UK, it is not until exchange that sales are legally binding so there is no financial or legal penalty.
If the seller is in a chain and has paid out money for their own conveyancing solicitors and surveyors, gazundering puts them in a particularly difficult position, and they often have to accept the lower offer to keep the chain intact and secure their own purchase.
How widespread is gazundering?
While relatively uncommon, gazundering is becoming increasingly evident in 2023, where there are more properties for sale than buyers to buy them.
Google search data has found that the term "gazundering" has seen a 97% increase since the beginning of the year and, according to a recent survey by House Buyer Bureau, out of 1,100 people who had sold a property in the last six months, 31% had experienced gazundering. Of these, 51% said that it happened more than two weeks before they were due to exchange, while, for 15%, it happened within two weeks of their exchange date.
What can sellers do to protect themselves from gazundering?
Value your home realistically
It’s worth being wary about accepting asking price offers or offers that seem too good to be true.
"Setting your initial asking price too high can increase the risk of gazundering," says Richard Davies, COO of Chestertons. "We therefore advise sellers to take current market conditions into account when establishing the value of their property."
Read more: How to improve your credit score before buying a house
An overinflated price might make your buyer realise further down the line that they can’t afford to pay that much or worry that they have overpaid. Unrealistic offers might also be made from people who deliberately plan to gazunder. Watch out for anyone who increases their offers quickly and substantially.
Don’t delay the selling process
Gazundering is more likely to happen the longer the selling process goes on.
"In essence, you can’t really protect yourself from it," says Andrew Groocock, regional partner at Knight Frank.
"The best advice really is to ensure that you are completely prepared for the transaction when a buyer is found, so have your solicitor instructed and ensure they have a complete pack ready to send to the other side. Time kills deals, so if you accept an offer and then begin preparing legals it only serves to extend the process."
Davies agrees: "The one factor that some buyers use to their advantage to gazunder is time. The longer the sale takes to complete, the higher the chances that the buyer will use this as an opportunity to put in a lower offer."
Instruct reputable professionals
Using reputable professionals in the selling process will mean things move along swiftly and smoothly and there will be less chance of getting gazundered. A good estate agent will make sure any offers on the property are backed up by bona fide financials.
"Ensure your estate agent verifies the buyer’s financial status, by checking proof of funds for the deposit as well as their agreement in principle," says Simone Santaub at Property Rescue. "This will confirm their affordability and means you have a better understanding of whether the buyer is going to go through with the purchase or if they’ll lower their offer to better suit their position."
Read more: What to do if you can’t sell your home
An effective estate agent should also continuously make sure all parties are doing their bit. "They will not only help you throughout the sales process but also create a timeline and set a date for contracts to exchange which will keep all parties, including solicitors, on track," says Davies.
Likewise, get recommendations from friends when it comes to choosing a conveyancing solicitor – they’ll be worth their weight in gold should a problem come up.
Be upfront about any potential problems
Buying a house is an expensive business and buyers can get very nervous if surveys or solicitors find any issues. If your home has a known problem, whether it’s a dodgy roof, lease that’s about to expire, a shared right of way or an extension that doesn’t have the correct planning permission, be upfront about it from the start.
"Buyers have a tendency to latch onto any issue no matter how small and use it as a way to renegotiate. If you have all your paperwork, insurances and guarantees in place then you negate the chance of anything like this happening," says Groocock.
"Buyers will conduct a survey of the property and any flaws that could lower its value will be discovered. It’s therefore crucial, from a moral as well as legal standpoint alone, to inform your buyers of any issues with the home that you are aware of," says Davies.
Alternatively, if you have time and know there’s something that can be easily resolved, try and sort this out before you put the house on the market.
Arrange an exclusivity agreement
If gazundering is a real concern, you can take the drastic step of signing a contract. "You could get your solicitor to draw up an exclusivity agreement between both parties, effectively making the verbal offer binding," says Christopher Bramwell, of Savills. "This might prove expensive, but it might be worth it to avoid the headaches associated with starting all over again."
Read more: Taking a lodger: Everything you need to know
What to do if you get gazundered?
Unfortunately, you can never 100% protect yourself from being gazundered. If it does happen, however, it’s important to listen to the buyer’s reasons why they want to offer lower. If they’re reducing the price because of something that’s been thrown up in the survey or legal process, you need to consider whether this will happen with other buyers too. If the answer is yes, you might want to think about negotiating; if not, you need to think about your own situation.
"If they are moving to their dream home and can still afford to even with the gazunder, then that is often the best thing to do. Look at the long term, if you’re going to live in your next house for 20 years, imagine the price chip spread across that length of time to lessen the blow," says Groocock.
Another approach is thinking about the lowest you’d go down to from the start.
"To prepare for this situation as much as possible, we advise sellers to always plan for the worst-case scenario so when you set out to list your home and have it evaluated, think about what the lowest offer that you are willing to accept might be. Being mentally prepared for the offer to go down will make it easier to make a decision should you face being gazundered," says Davies.
"Always remember that, if the offer is substantially lower and you are in no rush to sell, you have the right to refuse the exchange of contracts."
Watch: How much money do I need to buy a house?
Download the Yahoo Finance app, available for Apple and Android.
